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Question 7 The following transactions were recorded by an inexperienced bookkeeper during the months ofJune and July for Crane Company. Crane Company uses a perpetual inventory system. June 10 11 12 20 July 15 15 17 A purchase of $4,100 of merchandise from DanDan Distributors was debited to Purchases and credited to Cash. The terms of the purchase were 2J10, nf30, FOB shipping point. The invoice for freight in the amount of $205 for the delivery of merchandise purchased from DanDan was paid and was debited to Delivery Expense. Damaged goods totalling $400 were returned to DanDan Disb'ibutors for credit. The bookkeeper recorded a debit to Amounts Receivable and a credit to Sales Returns and Allowances. A payment was made to DanDan Distributors for the June 10 purchase. The payment was recorded as a debit to Purchases and a credit to Cash. Crane sold goods for $9,325, Sales was credited and Cost of Goods Sold was debited for this amount. The cost of the inventory sold was $4,100. The terms of the sale were 1115, nJ30, FOB destination. Freight charges on the above transaction were debited to Accounts Receivable and credited to Cash for $1.95. The bookkeeper believed the customer had to pay for the freight charges. Crane's manager gave the customer from July 15 a $400 allowance. The entry made to record the allowance was a debit to Sales and a credit to Sales Returns and Allowances. Review each transaction below and indicate whether you agree or disagree with how the bookkeeper accounted for the transaction. June 10 11 12 20 July 15 15 17 A purchase of $4,100 of merchandise From DanDan Distributors was debited to Purchases and credited to Cash. The terms of the purchase were 2f10, nf30, FOB shipping point. The invoice for freight in the amount of $205 for the delivery of merchandise purchased from DanDan was paid and was debited to Delivery Expense. Damaged goods totalling $400 were returned to DanDan Distributors for credit. The bookkeeper recorded a debit to Amounts Receivable and a credit to Sales Returns and Allowances. A payment was made to DanDan Distributors for the June 10 purchase. The payment was recorded as a debit to Purchases and a credit to cash. Crane sold goods for $9,325, Sales was credited and Cost of Goods Sold was debited for this amount. The cost of the inventory sold was $4,100. The terms of the sale were 1J15, nf30, FOB desb'nation. Freight charges on the above transaction were debited to Accounts Receivable and credited to Cash for $1.95. The bookkeeper believed the customer had to pay for the freight charges. Crane's manager gave the customer from July 15 a $400 allowance. The entry made to record the allowance was a debit to Sales and a credit to Sales Returns and Allowances. LLLLLmL If you disagreed with any of the accounting, prepare the correct entry. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record sales) Y (To record cost) (To record freight paid on goods sold)
